New Zealand Professional Investment Services Firm

Forsyth Barr

We are proud to be a New Zealand owned firm, with 21 offices throughout the country and over 300 employees. We assist personal, institutional and corporate clients providing a full range of investment services.

Forsyth Barr is a foundation New Zealand Exchange firm (NZX) and accredited market participant. We have been confirmed by the Financial Markets Authority as a Qualifying Financial Entity (QFE).

Research is the cornerstone of our advice. We have one of New Zealand's leading teams of analysts. Our global affiliations ensure comprehensive research coverage of all major investment markets.

New Zealand Professional Investment Services Firm, Forsyth Barr

Equity Bottom-Up

<h2>Fletcher Building<br>1H22 Preview&nbsp;— Solid 1H22 Building</h2>
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<p><strong>OUTPERFORM</strong></p>
<p>Fletcher Building (FBU) will report its 1H22 result on Wednesday, 16 February. Despite a lockdown, we expect FBU had a strong first half underpinned by robust demand. Whilst FBU will have incurred some costs from plant shutdowns we expect EBIT to be +5% with strong contributions from Building Products and Steel. Outlook statements are likely to include an Omicron caveat. We believe recent share price weakness reflects concerns around a slowing housing market. However, given the pipeline of work to be done, demand for materials is likely to remain robust for a prolonged period. With FBU trading on a 12-month forward P/E of 11.5x we reiterate our OUTPERFORM rating.</p>
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<h3>Key things to look for in 1H22 result:</h3>
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<li><strong>Robust NZ core demand</strong>: We expect FBU will have experienced pockets of strength&nbsp;in key businesses such as steel, plasterboard and insulation.&nbsp;FBU's&nbsp;domestic production has likely won share from importers given supply chain issues.</li>
<li><strong>Australia turning around slowly</strong>: We saw some half-on-half benefit from significant Australian restructuring in FY21 and we expect to see continued improvement in 1H22 underpinned by a robust demand backdrop.</li>
<li><strong>Cost pressure</strong>:&nbsp;FBU is likely facing a number of inflationary cost pressures. However, given domestic manufacturing and the strong demand backdrop we believe&nbsp;this is largely being offset with price and share gains from lower import competition.</li>
<li><strong>FY22 guidance</strong>: Due to COVID-19 uncertainty FBU is yet to prove any quantitative&nbsp;FY22 earnings guidance. In line with prior years, we expect guidance to be provided&nbsp;although the range may be wider&nbsp;than normal given the Omicron uncertainty in NZ.&nbsp;FBU's&nbsp;current trading and&nbsp;outlook comments will be of key interest to the market given the slowing NZ housing market.</li>
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<h3>Investor briefing</h3>
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<p>Conference call:&nbsp;11:00am (NZ time).&nbsp;Call pre-registration&nbsp;at&nbsp;<a href="https://s1.c-conf.com/diamondpass/10019367-534gul.html" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://s1.c-conf.com/diamondpass/10019367-534gul.html&amp;source=gmail&amp;ust=1644885191525000&amp;usg=AOvVaw3glaRHKUGd0zWsOn5CPZDT" rel="noopener">https://<wbr>s1.c-conf.com/diamondpass/<wbr>10019367-534gul.html</a>&nbsp;or&nbsp;webcast&nbsp;(listen only)&nbsp;<a href="https://edge.media-server.com/mmc/p/qoom4uht" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://edge.media-server.com/mmc/p/qoom4uht&amp;source=gmail&amp;ust=1644885191525000&amp;usg=AOvVaw3O-bd_zIUvhMsTUUjxgdEj" rel="noopener">https://edge.media-<wbr>server.com/mmc/p/qoom4uht</a></p>
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Fletcher Building 1H22 Preview&nbsp;— Solid 1H22 Building

OUTPERFORM
Fletcher Building (FBU) will report its 1H22 result on Wednesday, 16 February. Despite a lockdown, we expect FBU had a strong first half underpinned by robust demand. Whilst FBU will have incurred some costs from plant shutdowns we expect EBIT to be +5% with strong contributions from Building Products and Steel. Outlook statements are likely to include an Omicron caveat. We believe recent share price weakness reflects concerns around a slowing housing market. However, given the pipeline of work to be done, demand for materials is likely to remain robust for a prolonged period. With FBU trading on a 12-month forward P/E of 11.5x we reiterate our OUTPERFORM rating.


Key things to look for in 1H22 result:



Robust NZ core demand: We expect FBU will have experienced pockets of strength&nbsp;in key businesses such as steel, plasterboard and insulation.&nbsp;FBU's&nbsp;domestic production has likely won share from importers given supply chain issues.
Australia turning around slowly: We saw some half-on-half benefit from significant Australian restructuring in FY21 and we expect to see continued improvement in 1H22 underpinned by a robust demand backdrop.
Cost pressure:&nbsp;FBU is likely facing a number of inflationary cost pressures. However, given domestic manufacturing and the strong demand backdrop we believe&nbsp;this is largely being offset with price and share gains from lower import competition.
FY22 guidance: Due to COVID-19 uncertainty FBU is yet to prove any quantitative&nbsp;FY22 earnings guidance. In line with prior years, we expect guidance to be provided&nbsp;although the range may be wider&nbsp;than normal given the Omicron uncertainty in NZ.&nbsp;FBU's&nbsp;current trading and&nbsp;outlook comments will be of key interest to the market given the slowing NZ housing market.



Investor briefing


Conference call:&nbsp;11:00am (NZ time).&nbsp;Call pre-registration&nbsp;at&nbsp;https://s1.c-conf.com/diamondpass/10019367-534gul.html&nbsp;or&nbsp;webcast&nbsp;(listen only)&nbsp;https://edge.media-server.com/mmc/p/qoom4uht


Fletcher Building: 1H22 Preview — Solid 1H22 Building